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French taxation is a driving factor for the wealthy to seek residency abroad. Among the countries that attract the French, Switzerland is often a popular choice. However, Switzerland is a confederation composed of different cantons, each with its own tax regulations.
For comparison with the canton of Geneva, the maximum tax rates are as follows:
| France | Switzerland (Geneva canton) | |
| Income tax | 45 % + 17.2% (for real estate income) + 4% de CEHR | 44% |
| Weath tax | 1.5 % | 1% |
| Gift tax | For direct line : 45% | For direct line: none |
| Inheritance Tax | For direct line : 45% | For direct line : none |
Given these tax differences, Switzerland becomes an attractive destination. What are the key points to consider when an individual changes their country of residence to settle in Switzerland?
Income Tax and Reporting Obligations
When leaving France, the question of tax reporting arises. A taxpayer remains liable for income tax until their departure date. They must therefore file a standard income tax return for the period from January 1 of the year until the departure date.
After leaving, if the individual still receives only French-source income, they must submit a tax return to the Non-Residents Tax Service (SIP-NR) for the period from the departure date to the end of the year. In the following years, as long as the taxpayer continues to receive French-source income, they will file an income tax return as a non-resident for the entire year.
Important: It’s necessary to consult a Swiss advisor to declare French-source income on the Swiss tax return. Switzerland taxes worldwide income (except under tax treaties), with the exception of capital gains from private wealth, which are exempt. Since each country retains the right to tax income sourced from its territory, any capital gain generated in France will typically be taxed in France, not Switzerland.
Reporting Obligations Upon Arrival in Switzerland In Switzerland, the taxpayer must notify the cantonal population and migration office (OCPM) within 14 days of their arrival. They must request a residence permit, which is required for any stay longer than three months, and prove that they have sufficient means to live in Switzerland. Additionally, they must take out health insurance within three months of settling in Switzerland. If transferring personal belongings (furniture, etc.), customs clearance is required. For private moves, customs duties are exempt for items acquired for over six months. A customs clearance request must be made. |
Selling the Primary Residence in France: What Tax Implications?
In France, the sale of a primary residence is exempt from capital gains tax. However, if the property no longer qualifies as a primary residence at the time of sale, it is subject to taxation on capital gains at 19%, plus social contributions at 17.2%, and potentially a surtax on capital gains exceeding €50,000 (progressive tax rates from 2% to 6%).
The French tax authorities evaluate the concept of a primary residence on a case-by-case basis. Generally, a period of 6 months to 1 year to sell the former primary residence is considered reasonable. Thus, the taxpayer’s former primary residence will retain its status if it is sold within a reasonable timeframe and remained unoccupied between the departure date and the sale. However, if the property was rented out or made available to a third party, it loses its primary residence status.
RSM Advice: This qualification of primary residence is crucial, especially when moving to another country, as selling delays can be long. It’s recommended to sell the property before leaving or, at the very least, time the departure with the sale.
Important: Each situation must be evaluated individually.
Exit Tax Issues When Moving Fiscal Residence to Switzerland
Moving one’s fiscal residence outside of France triggers taxation on latent capital gains, deferred price claims, and capital gains in deferral.
This concerns taxpayers who:
- Have been fiscally domiciled in France for at least 6 years within the last 10 years.
- Hold shares or rights worth at least €800,000 or represent at least 50% of the social benefits of a company.
Deferral of Payment: How it works
A taxpayer can benefit from a deferral of payment, and a reduction may apply under certain conditions. The deferral of payment is automatic if moving to:
- An EU country
- A country that has signed an agreement with France to combat tax evasion and fraud, as well as an agreement for tax collection assistance.
Note: Switzerland has not signed such agreements, so a payment deferral request must be made.
The deferral of payment can be granted upon request, with the following conditions:
- Declare the amount of the relevant capital gains.
- Appoint a tax representative based in France.
- Provide guarantees (e.g., bank guarantee, mortgage, pledge) to ensure the recovery of the Treasury’s claim before leaving France.
If the global value of shares is less than €2.57 million, the deferral of payment on latent capital gains will expire 2 years after the departure from France. If the value exceeds this amount, the deferral period is extended to 5 years.
A French resident looking to relocate to Switzerland must carefully consider their tax reporting obligations in both France and Switzerland. It is important to strategically plan the sale of the primary residence and be mindful of the Exit Tax conditions.
RSM, the world’s 6th largest audit and advisory network, can assist with all types of tax declarations related to your personal situation (Income Tax, Wealth Tax, etc.) both in France and abroad.
